The Green Conundrum: Understanding the environmental impact of cryptocurrency

Kaycee Enerva

Kaycee Enerva

Created in Canva by Kaycee Enerva

Since its inception, cryptocurrency has become a buzzword in finance, promising secure and decentralised transactions. However, we need to discuss a flip side to this digital coin: its environmental impact. 

So today, let’s unpack the complex world of cryptocurrency and understand how this venture into digitalisation is affecting our planet. 

What is cryptocurrency?

Names like Bitcoin, Dogge Coin, and Ethereum might ring a bell. They’re types of digital currency that operate on blockchain technology – a system that keeps track of transactions over a network of computers. This process, known as mining, involves solving complex puzzles to verify transactions and keep the network secure.

Meaning of mining

Mining isn’t just a mental workout; it’s a power-hungry process. Miners use high-powered computers that guzzle a lot of electricity, and as the puzzles get harder and the network expands, the energy demand skyrockets.

Here’s where the problem lies: the energy consumption of cryptocurrency mining is through the roof. Even tech Bill Gates has thrown shade at how much electricity Bitcoin transactions use.

“Bitcoin uses more electricity per transaction than any other method known to mankind,” Gates told the New York Times in an interview, calling himself a “bitcoin sceptic” and adding that “it’s not a great climate thing”.

Much of this mining power comes from fossil fuels, like coal, which pumps carbon emissions into the atmosphere and worsens climate change. Plus, the mining rigs – those powerful computers – become outdated about every 18 months, adding to our pile of electronic waste.

PoW vs PoS

The debate around cryptocurrency isn’t just about digital dollars and cents; it’s also about how we validate these transactions. Bitcoin and many others use a method called Proof-of-Work (PoW), a major energy hog.

Fortunately, some cryptocurrencies, like the upcoming Ethereum 2.0, are looking at Proof-of-Stake (PoS), which could be a game-changer in reducing energy use since it depends on the amount of cryptocurrency an entity owns, not on solving puzzles.

Even US Treasury Secretary Janet Yellen has voiced concerns, calling Bitcoin a “highly speculative” and “inefficient” way to handle transactions, stunned by the energy it consumes.

What we can do about it?

All is not lost. We can still make a difference by supporting cryptocurrencies that use PoS or other energy-saving methods, such as those run by light, water, or even wind, which can help lighten their carbon footprint.

While cryptocurrency opens up new doors for financial innovation, we can’t ignore the consequences. Let’s make choices that are good for our crypto-wallets and the planet.

Kaycee Enerva

Kaycee Enerva

A digital content manager based in the Philippines, Kaycee Enerva has written for multiple publications over several years. A graduate of Computer Science, she exchanged a career in IT to pursue her passion for writing. She's slowly practicing sustainability through period cups, and eating more plant-based food.

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